Harvey was an extraordinary event and calls for an extraordinary response. That response may include raising more revenue for flood projects in our region. But the proposal by Sylvester Turner for City Council to immediately raise the City’s property taxes by $113 million raises a number of troubling question.
First, let’s not kid ourselves that his money is going to be used to stem flooding. Since 2012, the City has collected about $800 million in “drainage fees.” A tiny fraction of that money has actually been spent on flood control projects. Trust me, none of this $113 million will be.
Under the property tax cap charter amendment, City Council can raise additional property tax revenue over the cap by an amount “necessitated by city expenditures related to the inclusion of the city in any declaration of an emergency or disaster.”
Therefore, the threshold question must be: How is the $113 million going to be spent? The only explanations we have gotten so far is that the City will have to pony up about $20 million for it share of debris removal expenses, needs to replace about 300 flooded vehicles and repair some unspecified damages to some of the City’s facilities. But we have a $20 million “rainy day fund” (recently renamed the Budget Stabilization Fund) for exactly this purpose. And it should not cost more than about $15 million to replace 300 vehicles. So where is the rest of the money going?
And were any of those losses covered by insurance? I found a note in the 2016 Annual Report that appears to suggest that the City is covered for any flood losses over $10 million. I do not know if that is actually the case or not. But if we do not have any coverage, why not? (And for that matter, why were over 300+ vehicles left where they would be flooded in the first place?)
How much of these expenses will be covered by donations? Are there alternatives to raising taxes? Can some of the TIRZ money be tapped? City reports show there is about a $50 million fund balance in the “dedicated” drainage fund. Can that be used?
City Council has an obligation under the charter to demand an accounting of what expenses are necessitated by the disaster before voting to suspend the cap. To do otherwise raises the question of whether this whole exercise is just a pretext to accomplish what the advocates of repealing the property tax cap knew they could not do at the ballot box.
There are two things that make me suspicious this is just such a pretext. First, the increase is exactly (to the one-hundredth percent) the amount the tax rate has been decreased because of the property tax cap. Are we to believe that the city expenditures necessitated by the storm just happen to come out to that exact number?
Second, Turner’s main surrogate for the repeal of the property tax cap, Council Member Dwight Boykins, made a telling statement. He told the Houston Chronicle, “Anything to bust that damn rev cap, I’m in.
I think Boykins statement reflects the true opinion of many at City Hall. They resent that Houston taxpayers have limited the amount that they can increase the property tax and will use any device or excuse to get rid of the cap, including exploiting a natural disaster.
I think it is also noteworthy that no other taxing jurisdiction in our area has proposed increasing taxes in response to Harvey. The County and HISD both had more severe damages to their facilities, as did several of our sister cities on a relative basis. Why is the City of Houston the only jurisdiction that needs to immediately raise its taxes.
There could also be an unintended consequence from a tax increase. It could spark a taxpayer backlash that will show up at the polls in the November for the City’s bond election. My guess is that the improvement bonds are already in trouble since they have no money for streets or drainage. But this could also imperil the passage of the pension bonds, which have, at least to now, enjoyed a comfortable margin of support. The additional revenue from this tax increase will pale in comparison to the costs if the City is forced to go back to the drawing board on pensions.
Many in this City are hurting right now. True, the proposed tax increase will not make a significant difference to most. But the optics of the City piling on to their misfortune are ugly and will do much to unravel the unity we have found through this ordeal.
And it is $113 million that the City Council will decide how to spend instead of taxpayers. That is $113 million less for Houstonians to repair damaged homes, replace flooded items and give to charities.
Every tax dollar is a precious trust and especially so under these circumstances. There may be a case for the City increasing taxes. But that case has yet to be made.